UBS Group AG

Ladies and gentlemen, good morning. Welcome to the UPS First Quarter 2020 presentation. The conference must not be recorded for publication or broadcast. You can register for questions at any time by pressing star and one on your telephone. Should you need operator assistance, please press star and zero. At this time, it's my pleasure to hand over to Mr. Martin Ocinga, UPS Investor Relations. Please go ahead, sir.

Good morning and welcome to our first quarter 2020 earnings call. Before we start, I should draw your attention to our slide regarding forward-looking statements at the end of our presentation. For more information, please refer to the risk factors in our latest annual report, together with the additional disclosures included in our first quarter report and related SEC filings. Now over to Sergio.

Good morning and thank you all for joining us today. I hope you and your families are safe and healthy. Our toads are with all the people affected by the virus, as well as those fighting its spread at the frontline, day in, day out. All of us at UBS are humbled and inspired by their example. I would also like to take a moment to commemorate Marcel Ospel, our former chairman, and Jörg Sellner, former member of the Group Executive Board, who both passed away recently. Marcel laid the foundation of our firm as we know it today. And Jörg helps building our unique wealth management franchise. Our key messages for today are summarized on this slide. This quarter, I can comfortably say that you saw UBS at its best in all dimensions. Starting with our support to overcome the shocks on the economy and society we are currently experiencing. A huge collective effort is needed. Unlike the financial crisis, banks can be part of the solution this time around by supporting clients as well as working in partnership with policymakers and regulators to provide an effective transmission mechanism for government support. UBS is and wants to be part of the solution. Social responsibility was already a key part of UBS's agenda, so supporting our employees, clients, and communities is a natural extension of what we are already doing. Our first priority from the very beginning has been the safety and well-being of our employees. We introduced enhanced procedures to safeguard tools whose presence in our facilities is critical and almost everybody in the firm now has the ability to work from home. We know the current situation is challenging for many of our staff, so we are providing extra support and help to balance work and extended family care needs. Across the organization, from our technology and operation teams right through our client-facing staff, our employees made sure that we continue to deliver for our clients. We provided them with advice when they needed it, the most and more. Thanks to disciplined risk management and resource allocation going into the crisis, we have the capacity to lend and provide liquidity to our clients, big and small. With a $15 billion increase in loans in the quarter, we went well beyond participation in the government relief programs. From the very beginning, we supported and played an active role in shaping the Swiss SME lending program, which I will cover in a minute. We have also been active in the U.S., where we have nearly a third of our staff. There, we expect to make up to $2 billion available for loans to small businesses under the federal plan. To help those who are fighting against the virus at the frontline and for people in need, UBS is contributing $30 million for global aid and local projects in our communities. This amount was funded out of the variable compensation pool. The group executive board and our employees around the world are donating their time and money to coronavirus-related efforts in their communities something we actively support in many ways. Crises like this one show the true character of people and organizations. And I have to say, our employees' response across the entire firm has been remarkable. So I'd like to thank all of my colleagues for their efforts. Our operational resilience, strong financial position, and successful business model has been and continue to be a great asset, particularly in this environment. They are the result of investment and discipline execution of our strategy over the years. We have been consistently investing over 10% of our revenues in technology for years, building a rock-solid infrastructure and client-centric digital capabilities. And today, those investments are really paying off. Our business continuity plans proved effective as we adapted and responded to the current situation, showing a higher degree of digital agility at scale. It was a remarkable feat While managing the business efficiently and effectively, we leverage our investments and early Asia experiences helped us to rapidly scale up flexible working capabilities globally. Today, 90,000 people can connect from home on UBS's systems. They are able to do that at any point in time and with access to core capabilities they need. This includes our employees and external staff, all part of the UBS ecosystem. We successfully managed March high volume and activity across our trading and client platforms, including peaks of three times the normal levels, which enabled us to gain market share and share of wallet with our clients. We believe many of the operational changes will be permanent so learning from today will make us even better tomorrow this challenging environment has also brought us even closer together every day i see example of even better collaboration being driven by a sense of urgency to help each other and to do the best for clients many of us at ubs are finding that being apart can actually bring us closer together. This operation of resilience and strong culture is complemented by our strong financial position and clear strategic direction. Over the last decade, we significantly reduced our risk profile, putting financial strength, asset-gathering businesses, and our universal bank at the heart of our strategy. This is complemented by our focused investment bank. We have been hard at work developing our unique and complementary business portfolio and geographic footprint, leveraging our integrated bank approach. Our capacity to generate capital, diversified earning streams, and attractive business mix mean we are well equipped to handle adverse conditions. This makes us attractive for depositors and bondholders seeking stability. We are very mindful of our responsibilities for those on both sides of our balance sheet. As a Swiss-based group and the number one bank in Switzerland, we feel a special responsibility to support our home market in weathering the effects of the crisis. We made sure clients who use UBS for their day-to-day financial needs had uninterrupted access to their funds as well as our transaction capabilities and advice. Their mobile and online activity increased significantly with mobile login up nearly 40% and online onboarding nearly doubling in the quarter. We also kept half of our branches open maintaining ease of access for our clients while ensuring the highest health and safety standards. Our commitment to lending and provide resources went well beyond the government-backed program. We issued $1 billion in new mortgages to individual clients and provided $2 billion in net new loans to Swiss corporates. These numbers are on top of the more than 2.5 billion we provided to over 21,000 Swiss S&Es under the government-backed programs, which we swiftly implemented by mobilizing significant resources. I want to be very clear on two points here. First, UBS will not make any profits from the government-backed loans. If there are any, we will donate them directly to relief efforts. Second, we are not pushing out risk to taxpayers. Around two-thirds of the SMEs who applied for loans under the program did not have a credit line with UBS before. And for the remaining third who did, the vast majority are healthy and should have no issue repaying debts. A good indicator of the strength of our SME client is that, as of last Friday, they had drawn only about a third of the credit lines we provided under the program. As I mentioned, our employees' professionalism and expertise in looking after our clients' needs, offering advice and solutions made a big difference this quarter. By smartly adapting to conditions and new ways of working, we were able to deepen our relationship with many of our clients. Our CIO and research teams have played a critical role in delivering timely advice to corporate, institutional, and wealth clients. They have issued high-quality, differentiating content at lightning speed across a wide range of digital channels. For example, in March alone, our research teams published over 13,000 reports and organized over 1,500 conference calls, live streams, web seminars, and podcasts, and even held a virtual art gallery viewing. These efforts were highly appreciated by clients, and we saw significant increase in their engagement levels. The number of CIO interactions more than doubled in the quarter. Let me give you a quick flavor for our most recent investor survey, which will be published tomorrow. Investors remain optimistic over the long term, even if short-term sentiment turned more negative, as you can see here. This is especially clear in the US where the impact of the crisis on the job market has been most pronounced so far. We are not seeing signs of investor panicking, however. with only 16% of them planning to reduce their investments. More than a third are considering increasing their exposure over the next six months, showing there is a great potential for us to advise and interact with clients. Now moving on financial results. As I said, this quarter you saw UBS at its best, including our financial performance and confirming our ability to deliver in a variety of conditions. Our net profit increased 40% to 1.6 billion and return on CT1 reached 17.7%. The results were driven by strong performances across all our businesses. And very importantly, these were achieved without the help of special items in revenues, costs or tax. Credit losses and mark-to-market losses are part of banking, and we see them as an integral part of our results. In the current environment, the risk of incurring operational and trading losses is high, but our credit losses were limited, reflecting the quality of our lending book, effective hedging, and our disciplined risk-return approach over the last decade. We delivered attractive risk-adjusted returns in January, February, and during the very challenging March. Client engagement, market conditions, and our operational resilience led to high business volumes and a 10% improvement in operating income despite increased credit loss expenses. Also, we showed effective resource management across the organization. We remain disciplined on efficiency and effectiveness with costs consistent with our plans, leading to a 6% positive operating leverage. The cost-income ratio stood at 72%. We maintain high capital ratios in line with our guidance, again, without factoring any benefits from temporary regulatory reliefs. It goes without saying that temporary regulatory relief measures are welcome to help banks to facilitate credit to the economy. Many of the rules implemented after the financial crisis are good, and we supported them. Others proved to be less effective or counterproductive, which has become clearer over the last couple of months. What our industry needs right now is fixing those issues. not just through temporary relief, but by permanent changes that will allow for more planning certainty. We will continue to make constructive suggestions to shape a stronger system. During Q1, our CT1 capital increased by 1.1 billion after prudently accruing for a 2020 dividend and repurchasing 350 million worth of shares in the first half of the quarter. Our strong capital, funding, and liquidity position enable us to support our clients and the economy while paying dividends. Of course, we are mindful that capital returns are an important part of our equity story, but I'm sure you all understand that it is too early to talk about what this may be for this year. We are executing on the strategic priorities we presented in January as we managed through the crisis. We are making good progress on our initiatives across the firm to build a more integrated bank and to deliver the very best of UBS to clients. Let me pick up on global wealth management as an example. In January, Iqbal and Tom outlined steps to unlock the franchise's full potential, and these are being delivered at significant speed. We have already completed a number of initiatives, such as aligning the Altrain Edwards segment with the regions and flattening the organizational structure. The more integrated and client-oriented setup, faster decision-making, empowerment, and reduced complexity are making a difference already. We are also active in our more long-term collaboration plans. For example, we made good progress in the build-out of our global family office capabilities and onboarding of new clients. Also, the partnership between global wealth management and asset management for our U.S. wealth management clients investing in separately managed accounts led to $9 billion of inflows for asset management in the quarter. This has been a resounding success that by far exceeded our plans. So summing up, I'm proud of how well we delivered this quarter, not only for our clients, but also for our shareholders. I will now hand over to Kurt before some final remarks.